Advertising-supported distribution of audio-video data may be implemented from a content server to remote client devices over computer networks, telecommunications networks, and combinations of such networks, using various methods, for example progressive downloading or streaming. Platforms for such distribution may include sites that offer a great variety of different programming, including both newly released episodes of serial programs, major features, documentaries, special events, archives of past episodes and classic serial programs, of different types targeted to users having various different demographic profiles or located in different areas, and in various formats for use on different kinds of player devices. One or more video ads may be inserted into each video program and sold to advertisers who are charged based on how many times each advertisement is played on a client device; i.e., for each video ad impression.
The ad “impression” may be used as a fundamental unit by which to measure advertising for commercial purposes. Although it may be defined in various ways depending on the context and purpose of measurement, in a general sense an ad impression may be understood as an event in which a person is in some sense exposed to or “impressed” with a discrete advertising message. In the context of video advertising, the event of completing the output of a defined portion or all of a video advertisement on a client device may be counted as one or more impressions, depending on the number of people viewing or likely to be viewing the device. For example, completing output of a video ad on a notepad device likely to be viewed by one person may be counted as a single impression, while completing output of a video ad on a video scoreboard of a stadium during an event attended by thousands of people may be counted as many impressions based on the attendance figures for the event.
However advertising is measured, it is generally sold prospectively; that is, before the purchased impressions actually occur. Accordingly, both buyer and seller rely on estimates of future value to settle on a transaction price. In a video streaming system or analogous interactive online advertising system, the system operator may control access to records of advertising impressions, and thus may equip itself with superior insight into the advertising metrics that are likely to be realized by every advertising lot sold. The buyer, on the other hand, may have superior knowledge of advertising effectiveness based on its past experience with similar ad purchases, and may be able to better discern market prices by obtaining competing offers. The buyer and seller may elect to share information with each other in the process of a negotiated sale and purchase of a lot of video advertising.
A substantial portion of video advertising may be sold through such negotiated exchanges between a buyer and seller. In essence, the negotiated exchange enables the buyer and seller to reach a mutually beneficial price, if it is possible to do so. For the ad buyer, an acceptable price may be any price at which the cost of the advertising lot is less than or equal to (including all indirect benefits of contracting with the ad seller) what may be obtained from a competing ad seller (if any), while also being less than the marginal benefit the ad buyer expects to receive from purchasing the ads. For the ad seller, an acceptable price may be any price not less than (including all indirect benefits of contracting with the ad buyer) can be obtained from competing ad buyers (if any), which is also greater than the cost of providing the advertising lot. Both the seller and buyer also experience a certain transaction cost associated with the negotiation process. Although ad sellers may find direct negotiations useful for selling a substantial portion of inventory, sellers may also regularly experience inventory surpluses that cannot feasibly be sold through negotiated exchanges.
A seller may use various methods to dispose of such surpluses, including, for example, using the inventory for the seller's promotional purposes, lowering the number of ads supplied with content to improve user experience, or selling the surplus inventory using an auction transaction, wherein prospective buyers are invited to bid on various inventory lots, typically through an on-line bidding system. The ad seller may define parameters of the auctioned lots and set reserve or minimum pricing, sometimes referred to as a “floor price.” The floor price may be known to the bidders, or kept secret until after the bidding is completed. If the floor price is known in advance, bidding may begin at the floor price; if there are no bids then the lot goes unsold. If the floor price is initially secret, bidding begins at any amount and continues until no more bids are offered. If the final bid is equal to or greater than the floor price, the lot is sold at the final bid price; if the final bid is less than the floor price, the lot goes unsold.
Generally, the ad seller may elect not to use the auction to unload surplus inventory at any price; or even at any price above marginal cost. Overly drastic discounting of ad inventory may be undesirable for many reasons. For example, auctions closing at too low of a price may, over time, tend to depress the market price and lead to an excess of advertising in the online system. Conversely, setting too high a floor price may discourage bidding or result in underutilization of the ad distribution system. Prior approaches to setting floor pricing for ad inventory may be either overly crude or rely too much on guesswork by experienced managers.
Consequently, prior methods of managing ad inventory auctions, including setting reserve prices and related operations, may result in placing too high or too low a valuation on ad inventory made available for disposal at auction. These and other limitations of prior methods for managing auctioning of ads to be placed in a diversified content inventory of an online video system may be overcome by the novel methods and apparatus disclosed herein.